Damage before settlement


Hi Everyone
Just as luck would have it, my ip (which is due to settle early January) was hit by a truck today! The verandah has been completely destroyed and a small portion of the brick wall has been damaged and an exposed metal beam has been significantly bent. From the street I could see through to a small part of the inside so there is definately some interior damage as well! I only found out about this from my property manager who happended to drive by! I have not been contacted by either the real estate agents or the vendors.
I am concerned that there will be structural damage to the property and I wonder if, before settlement, I should engage a structural engineer to ensure the property has been properly repaired. I know this is an unusual situation but would really appreciate any advice / experience.
Purchaser's power to rescind where house damaged.

Hi July,

Gee you like taxing my memory, don't you?? hehehe

OK, legislatively this is the answer:


Estate Agents (Contracts) Regulations 1997 - SCHEDULE

Form 1 Estate Agents Act 1980 CONTRACT NOTE

Loss or Damage Before Settlement
2.1 The vendor carries the risk of loss or damage to the property and the chattels until settlement.
2.2 The vendor must deliver the property and the chattels to the purchaser at settlement date in their present condition (fair wear and tear excepted).
2.3 If any chattel is not in its present condition (fair wear and tear
excepted) at settlement, the purchaser is only entitled to compensation from the vendor.

This quote is an extract from your contract, it is part of the General Conditions. This will be mentioned in a solicitor drawn contract, but these general conditions are implied in agent-drawn contracts. This condition means that the property has to be in the same condition at settlement as it was at signing.


Power of purchaser to rescind contract where house destroyed

34. Power of purchaser to rescind contract where house destroyed

(1) Where a contract for the sale of land upon which there is a dwelling-house has been entered into, and where the dwelling-house is so destroyed or damaged as to be unfit for occupation as a dwelling-house, before the purchaser becomes entitled to possession or to the receipt of rents and profits he may, at his option, rescind the contract by notice in writing given to the vendor or his legal practitioner within fourteen days after the purchaser becomes aware of the destruction of or damage to the dwelling-house.

(2) Upon rescission of a contract for the sale of land pursuant to this section-

(a) any moneys paid by the purchaser shall be refunded to him;

(b) any documents of title or transfer shall be returned to the vendor; and

(c) the provisions of section 35 shall not apply and the vendor and any other person entitled to benefit from any insurance policy shall be entitled to do so to the same extent as they would have been if the land had not been subject to the contract.

(3) Any provision in any contract for the sale of land or other document whereby any provision of this section is excluded, modified or rescinded shall be void and of no effect.

This means that the purchaser is able to rescind the contract if the house is uninhabitable at settlement.


(Please note, this post follows on from my "Do I have to have insurance before settlement" post)

What this means is that assuming you have insurance on the property you should start the insurance claim and repair procedure as soon as possible.

I would also have your solicitor contact theirs as soon as possible to advise them of the level of damage and also advise them that the damage is being rectified.

Be aware that the purchaser is within their rights to delay settlement until the property is in "substantially the same condition" as it was when the purchaser signed for the property.

Note also that this clause hangs largely on the definition of "HABITABLE". Although this is not clearly defined, the clause was meant to offer protection against total destruction, however I think that if the property is not in a condition where people could move in and live, I believe that would count. (There is power, under section 20 to call in arbitrators)

Please note the usual disclaimers, I am not a solicitor, this is not legal advice, see your solicitor. yadda yadda... :)

Hope this helps,

asy :D
Hi Asy
Thankyou for sharing your expertise. Should I get involved at this stage, I mean, do the vendors have an obligation to contact me If they just go ahead and get the damage repaired?
I would definately get involved.

That way you can keep an eye on proceedings. Also, since there is structural damage, you want to ensure that they do a good job repairing it. Especially since there is structural damage.

Also, since the porch is totally destroyed, and the ?lounge room? will need to be replastered in part, and probably repainted, I would be in there trying to choose colours, and styles for the verandah, etc...

The vendors are not obliged to contact you at all. I would at least contact the agent or your solicitor.

hope this helps,

asy :D

What's the situation with insurance between exchange and settlement?

It seems to me that the insurance companies can collect a double bonus- from both vendor and purchaser.

At what point should a purchaser get insurance? And why?

If the purchaser gets insurance, could that be claimed back from the vendor?
hi july,
sounds like they like to have a drive through at your place.
u might want to put in the big heavy duty bollars that they have in those shops to prevent the smash and grab or drive through in your case to happen again

Hi July

As Asy has pointed out, the vendor must deliver the property at settlement in a similar condition as when you inspected it and agreed to purchase. Asy covered the point well.

As for Insurance. When you exchanged contracts and presumably paid a deposit, perhaps 10%, then you immediately gained an equitable interest in the WHOLE property. Not just the the front corner or some other 10% part, but all of it.

Sure in a summation, your equity amounts to 10% in dollar terms but you are interested in ALL the property. With a long settlement, it is strongly recommended that you insure the property from exchange, declaring to the insurer your 10% deposit / equity.

You are well within your rights to approach the vendor or Agent and point out that you are aware of the damage and require access, builder inspection, engineers report or whatever is necessary to protect you interest.

If you experience any problems, talk to your Solicitor or do it first, now and take the worry off your mind.

Don't hang back, go for it, protect your asset.